General
Management's discussion and analysis of financial condition of theRichmond Mutual Bancorporation, Inc. (the "Company") atJune 30, 2022 , and the consolidated results of operations for the three and six month periods endedJune 30, 2022 , compared to the same periods in 2021, is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Form 10-Q. The terms "we," "our," "us," or the "Company" refer toRichmond Mutual Bancorporation, Inc. and its consolidated direct and indirect subsidiaries, FirstBank Richmond , which we sometimes refer to as the "Bank",First Insurance Management, Inc. ,FB Richmond Holdings, Inc. andFB Richmond Properties, Inc. , unless the context otherwise requires.
Cautionary Note Regarding Forward-Looking Statements
Certain matters in this Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of words such as "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would," and "could." These forward-looking statements include, but are not limited to:
•statements of our goals, intentions and expectations;
•statements regarding our business plans, prospects, growth and operating strategies;
•statements regarding the quality of our loan and investment portfolios; and
•estimates of our risks and future costs and benefits.
You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These forward-looking statements are based on our current beliefs and expectations and, by their nature, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
Important factors that could cause our actual results to differ materially from the results anticipated or projected, include, but are not limited to, the following:
•potential adverse impacts to economic conditions in the Company's local market areas, other markets where the Company has lending relationships, or other aspects of the Company's business operations or financial markets, generally, resulting from the novel coronavirus disease 2019 ("COVID-19") pandemic and any governmental or societal responses thereto; •supply chain disruptions due to COVID-19 employee absences, as well as the ongoing war inUkraine , could adversely impact the ability of our borrowers to manage their cash flow and ultimately to repay their loans;
•changes in economic conditions, either nationally or in our market area;
•general economic conditions, either nationally or in our market areas, that are worse than expected;
•changes in the level and direction of loan or lease delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan and lease losses;
•our ability to access cost-effective funding;
•fluctuations in real estate values, and residential, commercial, and multifamily real estate market conditions;
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•demand for loans and deposits in our market area;
•our ability to implement and change our business strategies;
•competition among depository and other financial institutions and equipment financing companies;
•the impact and intended termination of our frozen defined benefit plan;
•inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans and leases we have made and make;
•adverse changes in the securities or secondary mortgage markets;
•changes in the quality or composition of our loan, lease or investment portfolios;
•our ability to keep pace with technological changes, including our ability to identify and address cyber-security risks such as data security breaches, "denial of service" attacks, "hacking" and identity theft, and other attacks on our information technology systems or on the third-party vendors who perform several of our critical processing functions;
•the inability of third-party providers to perform as expected;
•our ability to manage market risk, credit risk and operational risk in the current economic environment;
•our ability to enter new markets successfully and capitalize on growth opportunities;
•our ability to retain key employees;
•our compensation expense associated with equity allocated or awarded to our employees;
•changes in the financial condition, results of operations or future prospects of issuers of securities that we own;
•our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;
•changes in consumer spending, borrowing and savings habits;
•changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, theFinancial Accounting Standards Board , theSecurities and Exchange Commission ("SEC") or thePublic Company Accounting Oversight Board , including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods;
•legislative or regulatory changes that adversely affect our business, including as a result of COVID-19, and the availability of resources to address such changes;
•our ability to pay dividends on our common stock;
•other economic, competitive, governmental, regulatory, and technical factors affecting our operations, pricing, products and services; and
•the other risks detailed in this report and from time to time in our other
filings with the
We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new
29 -------------------------------------------------------------------------------- information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements. Overview The Company, aMaryland corporation, is a bank holding company for its wholly owned subsidiary, FirstBank Richmond . Substantially all of the Company's business is conducted through FirstBank Richmond . The Company is regulated by theBoard of Governors of theFederal Reserve System (the "FRB") and theIndiana Department of Financial Institutions ("IDFI"). The Company's corporate office is located at31 North 9th Street ,Richmond, Indiana , and its telephone number is (765) 962-2581. FirstBank Richmond is anIndiana state-chartered commercial bank headquartered inRichmond, Indiana . The Bank was originally established in 1887 as anIndiana state-chartered mutual savings and loan association and in 1935 converted to a federal mutual savings and loan association, operating under the nameFirst Federal Savings and Loan Association of Richmond . In 1993, the Bank converted to a state-chartered mutual savings bank and changed its name to FirstBank Richmond , S.B. In 1998, the Bank, in connection with its non-stock mutual holding company reorganization, converted to a national bank charter operating as FirstBank Richmond , National Association. InJuly 2007 , Richmond Mutual Bancorporation-Delaware, the Bank's then current holding company, acquiredMutual Federal Savings Bank headquartered inSidney, Ohio . Mutual FederalSavings Bank was operated independently as a separately chartered, wholly owned subsidiary of Richmond Mutual Bancorporation-Delaware until 2016 when it was combined with the bank through an internal merger transaction that consolidated both banks into a single, more efficient commercial bank charter. In 2017, the Bank converted to anIndiana state-chartered commercial bank and changed its name to FirstBank Richmond . The former Mutual Federal Savings Bank continues to operate inOhio under the name Mutual Federal, a division of FirstBank Richmond . FirstBank Richmond provides full banking services through its seven full- and one limited-service offices located inCambridge City (1),Centerville (1), Richmond (5) andShelbyville (1),Indiana , its five full-service offices located inPiqua (2),Sidney (2) andTroy (1),Ohio , and its loan production office inColumbus, Ohio . Administrative, trust and wealth management services are conducted throughFirst Bank Richmond's Corporate Office/Financial Center located inRichmond, Indiana . As anIndiana -chartered commercial bank, First Bank Richmond is subject to regulation by the IDFI and theFederal Deposit Insurance Corporation ("FDIC"). Our principal business consists of attracting deposits from the general public, as well as brokered deposits, and investing those funds primarily in loans secured by commercial and multi-family real estate, first mortgages on owner-occupied, one- to four-family residences, a variety of consumer loans, direct financing leases and commercial and industrial loans. We also obtain funds by utilizingFederal Home Loan Bank ("FHLB") advances. Funds not invested in loans generally are invested in investment securities, including mortgage-backed and mortgage-related securities and government sponsored agency and municipal bonds. First Bank Richmond generates commercial, mortgage and consumer loans and leases and receives deposits from customers located primarily inWayne andShelby Counties, inIndiana andShelby ,Miami andFranklin (no deposits) Counties, inOhio . We sometimes refer to these counties as our primary market area.First Bank Richmond's loans are generally secured by specific items of collateral including real property, consumer assets and business assets. Our leasing operation consists of direct investments in equipment that we lease (referred to as direct finance leases) to small businesses located throughoutthe United States . Our lease portfolio consists of various kinds of equipment, generally technology-related, such as computer systems, medical equipment and general manufacturing, industrial, construction and transportation equipment. We seek leasing transactions where we believe the equipment leased is integral to the lessee's business. We also provide trust and wealth management services, including serving as executor and trustee under wills and deeds and as guardian and custodian of employee benefits, and manage private investment accounts for individuals and institutions. Total wealth management assets under management and administration were$134.4 million atJune 30, 2022 . Our results of operations are primarily dependent on net interest income. Net interest income is the difference between interest income, which is the income that is earned on loans and investments, and interest expense, which is the interest that is paid on deposits and borrowings. Other significant sources of pre-tax income are service charges (mostly from service charges on deposit accounts and loan servicing fees), and fees from sale of residential mortgage loans originated for sale in the secondary market. We also recognize income from the sale of investment securities. 30 -------------------------------------------------------------------------------- Changes in market interest rates, the slope of the yield curve, and interest we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and shareholders' equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period.First Insurance Management, Inc. , a wholly-owned subsidiary of the Company which was formed and began operations inJune 2022 , is aNevada -based captive insurance company that insures against certain risks unique to the operations of the Company and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace.First Insurance Management, Inc. is subject to the regulations of theState of Nevada and undergoes periodic examinations by theNevada Division of Insurance .FB Richmond Holdings, Inc. , a wholly-owned subsidiary of First Bank Richmond which was formed and began operations inApril 2020 , is aNevada corporation that holds and manages substantially all ofFirst Bank Richmond's investment portfolio.FB Richmond Holdings, Inc. has one active subsidiary,FB Richmond Properties, Inc. , aDelaware corporation which holds loans on behalf of the Bank. AtJune 30, 2022 , on a consolidated basis, we had$1.3 billion in assets,$891.9 million in loans and leases, net of allowance,$945.3 million in deposits and$138.9 million in stockholders' equity. AtJune 30, 2022 ,First Bank Richmond's total risk-based capital ratio was 16.72%, exceeding the 10.0% requirement for a well-capitalized institution. For the six months endedJune 30, 2022 , net income was$6.5 million , compared with net income of$5.3 million for the six months endedJune 30, 2021 . Critical Accounting Policies Certain accounting policies are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management believes that its critical accounting policies include determining the allowance for loan and lease losses, the valuation of foreclosed assets, mortgage servicing rights, valuation of intangible assets and securities, deferred tax asset and income tax accounting. Allowance for Loan and Lease Losses. We maintain an allowance for loan and lease losses to cover probable incurred credit losses at the balance sheet date. Loan and lease losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in our judgment, should be charged-off. A provision for loan and lease losses is charged to operations based on our periodic evaluation of the necessary allowance balance. We have an established process to determine the adequacy of the allowance for loan and lease losses. The determination of the allowance is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on other classified loans and pools of homogeneous loans, and consideration of past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors, all of which may be susceptible to significant change. Mortgage Servicing Rights ("MSRs"). MSRs associated with loans originated and sold, where servicing is retained, are capitalized and included in the consolidated balance sheet. The value of the capitalized servicing rights represents the fair value of the right to service loans in the portfolio. Critical accounting policies for MSRs relate to the initial valuation and subsequent impairment tests. The methodology used to determine the valuation of MSRs requires the development and use of a number of estimates, including anticipated principal amortization and prepayments of that principal balance. Events that may significantly affect the estimates used are changes in interest rates, mortgage loan prepayment speeds and the payment performance of the underlying loans. The carrying value of the MSRs is periodically reviewed for impairment based on a determination of fair value. For purposes of measuring impairment, the servicing rights are compared to a valuation prepared based on a discounted cash flow methodology, utilizing current prepayment speeds and discount rates. Impairment, if any, is recognized through a valuation allowance and is recorded as a reduction in loan servicing fee income. Securities. UnderFinancial Accounting Standards Board ("FASB") Codification Topic 320 (ASC 320), Investments-Debt, investment securities must be classified as held to maturity, available for sale or trading. Management determines the appropriate classification at the time of purchase. The classification of securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. Debt securities are classified as held to maturity and carried at 31 -------------------------------------------------------------------------------- amortized cost when management has the positive intent and we have the ability to hold the securities to maturity. Securities not classified as held to maturity are classified as available for sale and are carried at fair value, with the unrealized holding gains and losses, net of tax, reported in other comprehensive income and which do not affect earnings until realized. The fair values of our securities are generally determined by reference to quoted prices from reliable independent sources utilizing observable inputs. Certain of our fair values of securities are determined using models whose significant value drivers or assumptions are unobservable and are significant to the fair value of the securities. These models are utilized when quoted prices are not available for certain securities or in markets where trading activity has slowed or ceased. When quoted prices are not available and are not provided by third party pricing services, management judgment is necessary to determine fair value. As such, fair value is determined using discounted cash flow analysis models, incorporating default rates, estimation of prepayment characteristics and implied volatilities. We evaluate all securities on a quarterly basis, and more frequently when economic conditions warrant additional evaluations, for determining if any other-than-temporary-impairments ("OTTI") exist pursuant to guidelines established in ASC 320. In evaluating the possible impairment of securities, consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and our ability and intent to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer's financial condition, we may consider whether the securities are issued by the federal government or its agencies or government sponsored agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer's financial condition. If management determines that an investment experienced an OTTI, we must then determine the amount of the OTTI to be recognized in earnings. If we do not intend to sell the security and it is more likely than not that we will not be required to sell the security before recovery of its amortized cost basis less any current period loss, the OTTI will be separated into the amount representing the credit loss and the amount related to all other factors. The amount of OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the OTTI related to other factors will be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings will become the new amortized cost basis of the investment. If management intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI will be recognized in earnings equal to the entire difference between the investment's amortized cost basis and its fair value at the balance sheet date. Any recoveries related to the value of these securities are recorded as an unrealized gain (as accumulated other comprehensive income (loss) in stockholders' equity) and not recognized in income until the security is ultimately sold. From time to time we may dispose of an impaired security in response to asset/liability management decisions, future market movements, business plan changes, or if the net proceeds can be reinvested at a rate of return that is expected to recover the loss within a reasonable period of time. Deferred Tax Asset. We have evaluated our deferred tax asset to determine if it is more likely than not that the asset will be utilized in the future. Our most recent evaluation has determined that we will more likely than not be able to utilize our remaining deferred tax asset. Income Tax Accounting. We file a consolidated federal income tax return. The provision for income taxes is based upon income in our consolidated financial statements, rather than amounts reported on our income tax return. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date.
Comparison of Financial Condition at
General. Total assets increased$4.0 million , or 0.3%, to$1.3 billion atJune 30, 2022 fromDecember 31, 2021 . The increase was primarily the result of increases of$59.0 million , or 7.1% in loans and leases, net of allowance, to$891.9 million and$9.4 million , or 86.9%, in other assets to$20.2 million atJune 30, 2022 . These increases were partially offset by a$55.8 million , or 15.2%, decrease in investment securities to$310.8 million and an$8.6 million , or 37.4% decrease in cash and cash equivalents to$14.4 million atJune 30, 2022 . 32 --------------------------------------------------------------------------------Investment Securities . Investment securities available-for-sale decreased$54.9 million , or 15.4%, to$302.6 million , while investment securities held-to-maturity decreased$897,000 , or 9.9%, to$8.1 million atJune 30, 2022 compared toDecember 31, 2021 . The decrease in investment securities available-for-sale was primarily the result of a portion of the maturing securities and payments on securities being used to fund growth in the loan and lease portfolio, as well as greater mark-to-market adjustments to the portfolio due to increases in unrealized losses. The decrease in investment securities held-to-maturity was the result of scheduled principal repayments and maturities. Loans and Leases. Our loan and lease portfolio, net of allowance for loan and lease losses, increased$59.0 million , or 7.1%, to$891.9 million atJune 30, 2022 from$832.8 million atDecember 31, 2021 . The increase in loans and leases was attributable primarily to increases in commercial real estate loans of$17.3 million , multi-family loans of$14.0 million , and construction and development loans of$11.2 million . Commercial and industrial loans increased$6.7 million despite a decrease of$2.3 million in Paycheck Protection Program ("PPP") loans resulting from loan forgiveness by theU.S. Small Business Administration ("SBA"). PPP loans totaled$3.7 million atJune 30, 2022 . Loans held for sale totaled$1.1 million and$558,000 atJune 30, 2022 andDecember 31, 2021 , respectively. Nonperforming loans and leases, consisting of nonaccrual loans and leases and accruing loans and leases more than 90 days past due, totaled$8.1 million or 0.89% of total loans and leases atJune 30, 2022 , compared to$8.0 million or 0.95% of total loans and leases atDecember 31, 2021 . Accruing loans and leases past due more than 90 days totaled$2.1 million atJune 30, 2022 , compared to$1.8 million atDecember 31, 2021 .
At
Allowance for Loan and Lease Losses. The allowance for loan and lease losses increased$273,000 , or 2.3%, to$12.4 million atJune 30, 2022 from$12.1 million atDecember 31, 2021 . AtJune 30, 2022 , the allowance for loan and lease losses totaled 1.37% of total loans and leases outstanding, compared to 1.43% atDecember 31, 2021 . Net charge-offs during the first half of 2022 were$127,000 , compared to net charge-offs of$85,000 during the first half of 2021. The allowance for loan and lease losses to non-performing loans and leases was 153.3% atJune 30, 2022 , compared to 150.8% atDecember 31, 2021 . Management regularly analyzes conditions within its geographic markets and evaluates its loan and lease portfolio. The Company evaluated its exposure to potential loan and lease losses as ofJune 30, 2022 , which evaluation included consideration of potential credit losses due to economic conditions driven by any lingering impact of the COVID-19 pandemic, particularly concerning the ongoing difficulty businesses are having in hiring sufficient employees and the supply chain disruptions this has caused, as well as supply chain disruptions caused by the war inUkraine . Any lingering impact of the pandemic and the war on the Company's deposit and loan customers is still not fully known at this time. Credit metrics are being reviewed and stress testing is being performed on the loan portfolio on an ongoing basis. Potentially higher risk segments of the portfolio, such as hotels and restaurants, are being closely monitored. Other Assets. Other assets increased$9.4 million , or 86.9%, to$20.2 million atJune 30, 2022 from$10.8 million atDecember 31, 2021 , primarily as a result of a$10.1 million increase in deferred tax assets due to the mark-to-market adjustment on the available-for-sale investment portfolio. Deposits. Total deposits increased$45.2 million , or 5.0%, to$945.3 million atJune 30, 2022 , from$900.2 million atDecember 31, 2021 . The increase in deposits primarily was due to an increase in brokered time deposits of$31.2 million and savings and money market accounts of$30.8 million , partially offset by a decrease in other time deposits of$21.7 million . Management attributes the shift in funds to customers anticipating potentially higher rates being paid on time deposits in 2022 in connection with the recent and expected future interest rate hikes by theFederal Reserve this year. Brokered deposits totaled$153.0 million , or 16.2% of total deposits, atJune 30, 2022 , compared to$121.8 million , or 13.5% of total deposits, atDecember 31, 2021 . AtJune 30, 2022 , noninterest-bearing deposits totaled$116.8 million , or 12.4% of total deposits, compared to$114.3 million or 12.7% of total deposits atDecember 31, 2021 .
Borrowings. Total borrowings, consisting solely of FHLB advances, were steady at
Stockholders' Equity. Stockholders' equity totaled$138.9 million atJune 30, 2022 , a decrease of$41.5 million , or 23.0%, fromDecember 31, 2021 . The decrease in stockholders' equity from year-end 2021 resulted from an increase in accumulated other comprehensive loss of$38.0 million due to a greater mark-to-market adjustment to the investment portfolio 33 -------------------------------------------------------------------------------- as a result of higher interest rates, the payment of$2.2 million in dividends to Company stockholders, and the repurchase of$9.0 million of Company common stock, partially offset by net income of$6.5 million . The Company repurchased 552,082 shares of Company common stock at an average price of$16.25 per share for a total of$9.0 million during the first six months of 2022. The Company's equity to asset ratio was 10.9% atJune 30, 2022 . AtJune 30, 2022 , the Bank's Tier 1 capital to total assets ratio was 12.7% and the Bank's capital was well in excess of all regulatory requirements.
Comparison of Results of Operations for the Three Months Ended
General. Net income for the three months endedJune 30, 2022 was$3.5 million , a$704,000 or 25.3% increase from net income of$2.8 million for the three months endedJune 30, 2021 . The$3.5 million in earnings equaled$0.31 diluted earnings per share for the second quarter of 2022, compared to$0.24 diluted earnings per share for the second quarter of 2021. The increase in net income was primarily the result of a$1.4 million increase in net interest income and a$330,000 decrease in the provision for loan losses, partially offset by a$464,000 decrease in noninterest income and a$278,000 increase in noninterest expense. Interest Income. Interest income increased$1.3 million , or 12.0%, to$12.4 million during the quarter endedJune 30, 2022 , compared to$11.1 million during the quarter endedJune 30, 2021 . Interest income on loans and leases increased$826,000 , or 8.4%, to$10.7 million for the quarter endedJune 30, 2022 , from$9.9 million for the comparable quarter in 2021, due to higher average balances in the loan and lease portfolio, partially offset by a decrease in the average loan and lease yield of 19 basis points. The average outstanding loan and lease balances were$875.8 million for the quarter endedJune 30, 2022 , compared to$778.4 million for the quarter endedJune 30, 2021 . The average yield on loans and leases was 4.88% for the quarter endedJune 30, 2022 , compared to 5.07% for the comparable quarter in 2021. Interest income included$91,000 in fees earned related to PPP loans in the quarter endedJune 30, 2022 compared to$696,000 during the same quarter in 2021. As ofJune 30, 2022 , total unrecognized fees on PPP loans were approximately$119,000 . Interest income on investment securities, including FHLB stock, increased$485,000 , or 38.8%, to$1.7 million during the quarter endedJune 30, 2022 , compared to the same quarter in 2021. The increase in interest income on investment securities from the comparable period in 2021 was due to an increase in the average balances of$10.5 million and a 53 basis point increase in the average yield earned on investment securities. The average balance of investment securities, including FHLB stock, was$332.9 million for the quarter endedJune 30, 2022 , compared to$322.4 million for the quarter endedJune 30, 2021 . The average yield on investment securities, including FHLB stock, was 2.08% for the second quarter of 2022, compared to 1.55% for the second quarter of 2021.
Interest Expense. Interest expense remained relatively flat at
Interest expense on deposits increased$53,000 , or 4.4%, to$1.3 million for the quarter endedJune 30, 2022 , from the comparable quarter in 2021. The increase in interest expense on deposits primarily was attributable to a$150.2 million increase in average interest-bearing deposit balances, partially offset by a 35 basis point decrease in the average rate paid on certificate of deposit accounts to 0.86% during the three months endedJune 30, 2022 , from 1.21% for the comparable quarter in 2021. The average rate paid on interest-bearing deposits was 0.62% for the quarter endedJune 30, 2022 , compared to 0.72% for the quarter endedJune 30, 2021 . The average balance of interest-bearing deposits increased to$826.3 million , or 22.2%, in the quarter endedJune 30, 2022 , compared to$676.2 million in the comparable quarter in 2021. Interest expense on FHLB borrowings decreased$76,000 , or 10.9%, to$624,000 in the second quarter of 2022 compared to$701,000 for the same quarter in 2021, due to a 15 basis point decline in the average rate paid on borrowings to 1.47% during the three months endedJune 30, 2022 , from 1.62% for the comparable quarter in 2021, and a$2.8 million decrease in the average outstanding balance of borrowings during the current quarter compared to the same period in 2021. Net Interest Income. Net interest income before the provision for loan and lease losses increased$1.4 million , or 14.8%, to$10.5 million in the second quarter of 2022, compared to$9.2 million for the second quarter of 2021. This increase was due to an increase in average interest-earning assets and a 26 basis point increase in the average interest rate spread during the second quarter of 2022 compared to the comparable quarter in 2021. Net interest margin (annualized) was 3.45% for the three months endedJune 30, 2022 , compared to 3.27% for the three months endedJune 30, 2021 . The increase in net interest margin was primarily due to the yield on interest-earning assets increasing 11 basis points while the rate paid on interest-bearing liabilities dropped 15 basis points. The average yield on PPP loans, including the recognition of deferred fees, resulted in a positive impact to the yield on loans and leases of three basis points during the quarter endedJune 30, 2022 , identical to the comparable quarter in 2021. Average Balances, Interest and Average Yields/Cost. The following tables set forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from 34 -------------------------------------------------------------------------------- average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using daily balances. Non-accruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income on loans and are not material. Three Months Ended June 30, 2022 2021 Average Interest Average Interest Balance Earned/ Yield/ Balance Earned/ Yield/ Outstanding Paid Rate Outstanding Paid Rate (Dollars in thousands) Interest-earning assets: Loans and leases receivable$ 875,801 $ 10,682 4.88 %$ 778,430 $ 9,857 5.07 % Securities 323,078 1,656 2.05 % 313,327 1,185 1.51 % FHLB stock 9,781 78 3.19 % 9,050 64 2.83 % Cash and cash equivalents and other 15,254 32 0.84 % 22,839 6 0.11 % Total interest-earning assets 1,223,914 12,448 4.07 % 1,123,646 11,112 3.96 % Non-earning assets 41,860 47,649 Total assets 1,265,774 1,171,295 Interest-bearing liabilities: Savings and money market accounts 296,224 388 0.52 % 253,086 317 0.50 % Interest-bearing checking accounts 169,618 111 0.26 % 152,596 88 0.23 % Certificate accounts 360,498 776 0.86 % 270,497 816 1.21 % Borrowings 170,264 624 1.47 % 173,077 701 1.62 % Total interest-bearing liabilities 996,604 1,899 0.76 % 849,256 1,922 0.91 % Noninterest-bearing demand deposits 113,887 112,279 Other liabilities 8,323 25,363 Stockholders' equity 146,960 184,397 Total liabilities and stockholders' equity 1,265,774 1,171,295 Net interest income$ 10,549 $ 9,190 Net earning assets$ 227,310 $ 274,390 Net interest rate spread(1) 3.31 % 3.05 % Net interest margin(2) 3.45 % 3.27 % Average interest-earning assets to average interest-bearing liabilities 122.81 % 132.31 % _____________ (1)Annualized. Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (2)Annualized. Net interest margin represents net interest income divided by average total interest-earning assets. Provision for Loan and Lease Losses. The provision for loan and lease losses for the three months endedJune 30, 2022 totaled$200,000 compared to$530,000 for the three months endedJune 30, 2021 , a$330,000 or 62.3% decrease. The decrease primarily was due to improvement in the overall economy from the effects of the COVID-19 pandemic and the continued positive effects of the government's response to the pandemic on the Bank's loan portfolio, partially offset by the increase in the loan portfolio. Net charge-offs during the second quarter of 2022 were$136,000 , compared to net charge-offs of$58,000 in the second quarter of 2021. While we believe the steps we have taken and continue to take are necessary to effectively manage our portfolio and assist our clients through the ongoing uncertainty surrounding the duration and impact of the COVID-19 pandemic, uncertainties relating to our allowance for loan losses are heightened as a result of any possible continuing effects of the COVID-19 pandemic, the recent dramatic rise in inflation and interest rates and potential supply chain disruptions due to the war inUkraine . 35 -------------------------------------------------------------------------------- Noninterest Income. Noninterest income decreased$464,000 or 28.3%, to$1.2 million for the quarter endedJune 30, 2022 , compared to$1.6 million for the comparable quarter in 2021. The decrease in noninterest income resulted primarily from a$348,000 or 61.1% decrease in net gains on loan and lease sales to$222,000 during the second quarter of 2022, compared to$569,000 during the second quarter of 2021. The decrease in net gains on loan and lease sales was due to declining mortgage banking activity primarily resulting from lower refinancing activity and a lower supply of houses for sale in the Bank's market area. During the three months endedJune 30, 2022 , the Company sold$9.9 million of loans compared to the sale of$19.2 million of loans during the three months endedJune 30, 2021 . Card fee income increased$27,000 , or 9.9%, to$302,000 in the second quarter of 2022 from$275,000 in the second quarter of 2021 due to increased debit card usage. Loan and lease servicing income decreased$71,000 , or 28.4%, to$178,000 for the second quarter of 2022 compared to$249,000 for the comparable quarter in 2021 as the Company recorded a recovery of$76,000 to the value of its mortgage servicing rights in the second quarter of 2022, compared to a recovery of$178,000 in the second quarter of 2021. Service fees on deposit accounts increased$50,000 , or 25.0%, to$248,000 for the quarter endedJune 30, 2022 , compared to$199,000 for the quarter endedJune 30, 2021 . The increase in service fees on deposit accounts during the second quarter of 2022 compared to the second quarter of 2021 was primarily the result of increased overdraft fees, many of which were waived in the second quarter of 2021. Noninterest Expense. Noninterest expense increased$278,000 , or 4.0%, to$7.2 million for the three months endedJune 30, 2022 , from$6.9 million for the same period in 2021. Salaries and employee benefits increased$201,000 , or 4.7%, to$4.5 million for the quarter endedJune 30, 2022 , compared to the same quarter in 2021. Other expenses decreased$85,000 , or 9.7%, to$791,000 in the second quarter of 2022 compared to the same quarter of 2021 primarily due to decreased loan expenses, franchise tax expense and expenses related to employee professional development, partially offset by a decrease in fraud losses compared to the same quarter of 2021. Income Tax Expense. Income tax expense increased$243,000 during the three months endedJune 30, 2022 , compared to the same period in 2021 due to a higher level of pre-tax income and a higher effective tax rate. The effective tax rate for the second quarter of 2022 was 20.2% compared to 18.7% for the same quarter a year ago.
Comparison of Results of Operations for the Six Months Ended
General. Net income for the six months endedJune 30, 2022 was$6.5 million , a$1.2 million or 21.7%, increase from net income of$5.3 million for the six months endedJune 30, 2021 . The$6.5 million in earnings equaled$0.58 diluted earnings per share for the first six months of 2022, compared to$0.45 diluted earnings per share for the first six months of 2021. The increase in net income was primarily the result of a$2.4 million increase in net interest income and a$530,000 decrease in the provision for loan losses, partially offset by a$876,000 decrease in noninterest income and a$634,000 increase in noninterest expense. Interest Income. Interest income increased$2.4 million , or 10.9%, to$24.4 million during the six months endedJune 30, 2022 , compared to$22.0 million during the six months endedJune 30, 2021 . Interest income on loans and leases increased$1.2 million , or 6.2%, to$20.9 million for the six months endedJune 30, 2022 , from$19.7 million for the comparable period in 2021, due to higher average balances in the loan and lease portfolio, partially offset by a decrease in the average loan and lease yield of 26 basis points. The average outstanding loan and lease balances were$862.9 million for the first six months of 2022, compared to$771.1 million for the first six months of 2021. The average yield on loans and leases was 4.86% for the six months endedJune 30, 2022 , compared to 5.12% for the comparable period in 2021. Interest income also included$259,000 in fees earned related to PPP loans in the six months endedJune 30, 2022 compared to$1.3 million during the same period in 2021. As ofJune 30, 2022 , total unrecognized fees on PPP loans were$119,000 . Interest income on investment securities, including FHLB stock, increased$1.1 million , or 50.7%, to$3.4 million during the six months endedJune 30, 2022 , compared to the same period in 2021. The increase in interest income on investment securities from the comparable period in 2021 was due to an increase in the average balances of$51.9 million and a 43 basis point increase in the average yield earned on investment securities. The average balance of investment securities, including FHLB stock, was$348.1 million for the six months endedJune 30, 2022 , compared to$296.2 million for the six months endedJune 30, 2021 . The average yield on investment securities, including FHLB stock, was 1.95% for the first half of 2022, compared to 1.52% for the first half of 2021. Interest Expense. Interest expense remained relatively flat at$3.8 million for the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . Interest expense on deposits increased$115,000 , or 4.8%, to$2.5 million for the six months endedJune 30, 2022 , from the comparable period in 2021. The increase in interest expense on deposits primarily was attributable to a$164.5 million increase in average interest-bearing deposit balances, partially offset by a 39 basis point decrease in the average rate paid on certificate of deposit accounts to 0.88% during the six months endedJune 30, 2022 , from 36 -------------------------------------------------------------------------------- 1.27% for the comparable period in 2021. The average rate paid on interest-bearing deposits was 0.62% for the six months endedJune 30, 2022 , compared to 0.75% for the six months endedJune 30, 2021 . The average balance of interest-bearing deposits increased to$810.0 million , or 25.5%, in the six months endedJune 30, 2022 , compared to$645.4 million in the comparable period in 2021. Interest expense on FHLB borrowings decreased$131,000 , or 9.3%, to$1.3 million in the first half of 2022 compared to$1.4 million for the same period in 2021, due to a 20 basis point decline in the average rate paid on borrowings to 1.43% during the six months endedJune 30, 2022 , from 1.63% for the comparable period in 2021, partially offset by a$5.3 million increase in the average outstanding balance of borrowings during the current period compared to the same period in 2021.
Net Interest Income. Net interest income before the provision for loan and lease
losses increased
This increase was due to an increase in average interest-earning assets and an 11 basis point increase in the average interest rate spread during the first six months of 2022 compared to the comparable period in 2021. Net interest margin (annualized) was 3.36% for the six months endedJune 30, 2022 , compared to 3.32% for the six months endedJune 30, 2021 . The increase in net interest margin was primarily due to the yield on interest-earning assets dropping slower than the rate paid on interest-bearing liabilities. The average yield on PPP loans, including the recognition of deferred fees, resulted in a positive impact to the yield on loans and leases of four basis points during the six months endedJune 30, 2022 , compared to a positive impact of eight basis points to the yield on loans and leases in the comparable period in 2021. Average Balances, Interest and Average Yields/Cost. The following tables set forth for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Average balances have been calculated using daily balances. Non-accruing loans have been included in the table as loans carrying a zero yield. Loan fees are included in interest income on loans and are not material. 37 --------------------------------------------------------------------------------
Six Months Ended June 30, 2022 2021 Average Interest Average Interest Balance Earned/ Yield/ Balance Earned/ Yield/ Outstanding Paid Rate Outstanding Paid Rate (Dollars in thousands) Interest-earning assets: Loans and leases receivable$ 862,940 $ 20,948 4.86 %$ 771,131 $ 19,724 5.12 % Securities 338,289 3,242 1.92 % 287,190 2,125 1.48 % FHLB stock 9,844 161 3.27 % 9,050 133 2.94 % Cash and cash equivalents and other 16,970 39 0.46 % 27,193 13 0.10 % Total interest-earning assets 1,228,043 24,390 3.97 % 1,094,564 21,995 4.02 % Non-earning assets 38,818 43,869 Total assets 1,266,861 1,138,433 Interest-bearing liabilities: Savings and money market accounts 280,313 725 0.52 % 238,200 595 0.50 % Interest-bearing checking accounts 167,630 208 0.25 % 147,555 169 0.23 % Certificate accounts 362,011 1,591 0.88 % 259,694 1,644 1.27 % Borrowings 176,845 1,264 1.43 % 171,547 1,395 1.63 % Total interest-bearing liabilities 986,799 3,788 0.77 % 816,996 3,803 0.93 % Noninterest-bearing demand deposits 112,393 108,420 Other liabilities 7,450 25,018 Stockholders' equity 160,219 187,999 Total liabilities and stockholders' equity 1,266,861 1,138,433 Net interest income$ 20,602 $ 18,192 Net earning assets$ 241,244 $ 277,568 Net interest rate spread(1) 3.20 % 3.09 % Net interest margin(2) 3.36 % 3.32 % Average interest-earning assets to average interest-bearing liabilities 124.45 % 133.97 % _____________ (1)Annualized. Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (2)Annualized. Net interest margin represents net interest income divided by average total interest-earning assets. Provision for Loan and Lease Losses. The provision for loan and lease losses for the six months endedJune 30, 2022 totaled$400,000 compared to$930,000 for the six months endedJune 30, 2021 , a$530,000 or 57.0% decrease. The decrease primarily was due to improvement in the overall economy from the effects of the COVID-19 pandemic and the positive effects of the government's response to the pandemic on the Bank's loan portfolio, partially offset by the increase in the loan portfolio. Net charge-offs during the first half of 2022 were$127,000 , compared to net charge-offs of$85,000 in the first half of 2021. Noninterest Income. Noninterest income decreased$876,000 , or 27.7%, to$2.3 million for the six months endedJune 30, 2022 , compared to$3.2 million for the comparable period in 2021. The decrease in noninterest income resulted primarily from a$1.1 million or 69.7% decrease in net gains on loan and lease sales to$465,000 during the first half of 2022, compared to$1.5 million during the first half of 2021. The decrease in net gains on loan and lease sales was due to declining mortgage banking activity primarily resulting from lower refinancing activity and a lower supply of houses for sale in the Bank's market area. During the six months endedJune 30, 2022 , the Company sold$20.5 million of loans compared to the sale of$45.1 million of loans during the six months endedJune 30, 2021 . Card fee income increased$63,000 , or 12.1%, to$580,000 in the first half of 2022 from$517,000 in the first half of 2021 due to increased debit card usage. Loan and lease servicing income increased$63,000 to$206,000 for the first half of 2022 compared to$143,000 for the comparable period in 2021 adversely impacted by a recorded impairment of$35,000 to the value of its mortgage servicing rights in the first half of 38 -------------------------------------------------------------------------------- 2022, compared to a recovery of$20,000 in the first half of 2021. Service fees on deposit accounts increased$90,000 , or 22.8%, to$483,000 for the six months endedJune 30, 2022 , compared to$393,000 for the six months endedJune 30, 2021 . The increase in service fees on deposit accounts during the first half of 2022 compared to the first half of 2021 was primarily the result of increased overdraft fees, many of which were waived in the first half of 2021. Noninterest Expense. Noninterest expense increased$634,000 , or 4.6%, to$14.5 million for the six months endedJune 30, 2022 , from$13.9 million for the same period in 2021. Salaries and employee benefits increased$207,000 , or 2.4%, to$9.0 million for the six months endedJune 30, 2022 , compared to the same period in 2021. Data processing fees increased$138,000 , or 12.7%, to$1.2 million in the first six months of 2022 compared to the same period of 2021, primarily due to the upgrading of our digital banking products. Net occupancy expenses increased$87,000 , or 13.9%, to$711,000 the first six months of 2022 compared to the same period of 2021, primarily due to higher property taxes, utilities expense, and maintenance expense. Other expenses increased$100,000 , or 6.1%, to$1.7 million in the first half of 2022 compared to the same period of 2021 primarily due to increased loan expenses, franchise tax expense, expenses related to employee professional development, and expenses related to brokered certificates of deposit, partially offset by a reduction in fraud losses. Income Tax Expense. Income tax expense increased$271,000 during the six months endedJune 30, 2022 , compared to the same period in 2021 due to a higher level of pre-tax income. The effective tax rate for the first half of 2022 was 18.7%, the same as the first half of 2021.
Capital and Liquidity
Capital. Shareholders' equity totaled$138.9 million atJune 30, 2022 and$180.5 million atDecember 31, 2021 . In addition to net income of$6.5 million , other sources of capital during the first six months of 2022 included$434,000 related to the allocation of ESOP shares during the year and$763,000 related to stock-based compensation. Uses of capital during the first six months of 2022 included$2.2 million of dividends paid on common stock,$38.0 million of other comprehensive loss, net of tax, and$9.0 million of stock repurchases. The decrease in the accumulated other comprehensive income/loss component of shareholders' equity was due to an increase in the unrealized loss on available-for-sale securities reflecting the increase in market interest rates during the current quarter. We paid a regular quarterly dividend of$0.10 per common share during the first half of 2022, and regular quarterly dividends of$0.07 per common share and a special dividend of$0.50 per common share during 2021. We currently expect to continue the current practice of paying regular quarterly cash dividends on common stock subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. Assuming continued payment during 2022 at the current dividend rate of$0.10 per share, our average total dividend paid each quarter would be approximately$1.2 million based on the number of our current outstanding shares (which assumes no increases or decreases in the number of shares, except in connection with the anticipated vesting of currently outstanding equity awards). Stock Repurchase Plans. From time to time, our board of directors has authorized stock repurchase plans. In general, stock-repurchase plans allow us to proactively manage our capital position and return excess capital to shareholders. Shares purchased under such plans also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. OnMay 19, 2021 , the Board of Directors authorized a third stock repurchase program for up to 1,263,841 shares, or approximately 10% of our outstanding shares, which was completed onJuly 7, 2022 . OnJuly 21, 2022 , the Company announced a fourth stock repurchase program for up to 1,184,649 shares, or approximately 10% of the Company's then outstanding shares, which program will expire inJuly 2023 unless completed sooner. The repurchase program does not obligate the Company to purchase any particular number of shares. See Part II, Item 2 - Unregistered Sales ofEquity Securities and Use of Proceeds. Liquidity. Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds. The objective of our liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund our operations and to meet obligations and other commitments on a timely basis and at a reasonable cost. We seek to achieve this objective and ensure that funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which includes managing the mix and time to maturity of financial assets and financial liabilities on our balance sheet. Our liquidity position is enhanced by our ability to raise additional funds as needed in the wholesale markets. 39 -------------------------------------------------------------------------------- Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets generally include cash, interest-bearing deposits in banks, securities available for sale, maturities and cash flow from securities held to maturity, sales of fixed rate residential mortgage loans in the secondary market, and federal funds sold and resell agreements. Liability liquidity generally is provided by access to funding sources which include core deposits and advances from the FHLB and other borrowing relationships with third party financial institutions. Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. As ofJune 30, 2022 , we had approximately$3.6 million held in an interest-bearing account at theFederal Reserve . We also have the ability to borrow funds as a member of the FHLB. As ofJune 30, 2022 , based upon available, pledgeable collateral, our total remaining borrowing capacity with the FHLB was approximately$70.0 million . Furthermore, atJune 30, 2022 , we had approximately$206.2 million in securities that were unencumbered by a pledge and could be used to support additional borrowings through repurchase agreements or theFederal Reserve discount window, as needed. As ofJune 30, 2022 , management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us. Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities for the six months endedJune 30, 2022 was$10.0 million , compared to$2.5 million of net cash used in operating activities for the six months endedJune 30, 2021 . During the six months endedJune 30, 2022 , net cash used in investing activities was$52.5 million , which consisted primarily of net change in loans receivable, compared to$133.4 million of net cash used in investing activities for the six months endedJune 30, 2021 . Net cash provided by financing activities for the six months endedJune 30, 2022 was$33.9 million , which was comprised primarily of net change in deposits, compared to$104.2 million of net cash provided by financing activities during the six months endedJune 30, 2021 . Management believes the capital sources are adequate to meet all reasonably foreseeable short-term and long-term cash requirements and there has not been a material change in our liquidity and capital resources since the information disclosed in our 2021 Form 10-K other than set forth above.Richmond Mutual Bancorporation is a separate legal entity from First Bank Richmond and must provide for its own liquidity. In addition to its own operating expenses,Richmond Mutual Bancorporation is responsible for paying for any stock repurchases, dividends declared to its stockholders and other general corporate expenses. SinceRichmond Mutual Bancorporation is a holding company and does not conduct operations, its primary sources of liquidity are interest on investment securities purchased with proceeds from our initial public offering, dividends upstreamed from First Bank Richmond and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid by First Bank Richmond. AtJune 30, 2022 ,Richmond Mutual Bancorporation , on an unconsolidated basis, had$8.9 million in cash, noninterest-bearing deposits and liquid investments generally available for its cash needs. Regulatory Capital Requirements. First Bank Richmond is subject to minimum capital requirements imposed by theFDIC . TheFDIC may require us to have additional capital above the specific regulatory levels if it believes we are subject to increased risk due to asset problems, high interest rate risk and other risks. AtJune 30, 2022 ,First Bank Richmond's regulatory capital exceeded theFDIC regulatory requirements, and First Bank Richmond was well-capitalized under regulatory prompt corrective action standards. Consistent with our goals to operate a sound and profitable organization, our policy is for First Bank Richmond to maintain well-capitalized status. 40 --------------------------------------------------------------------------------
To Be Well Actual Required for Adequate Capital Capitalized Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) As ofJune 30, 2022 Total risk-based capital (to risk weighted assets)$ 177,431 16.7 %$ 84,899 8.0 %$ 106,124 10.0 % Tier 1 risk-based capital (to risk weighted assets) 165,050 15.6 63,674 6.0 84,899 8.0 Common equity tier 1 capital (to risk weighted assets) 165,050 15.6 47,756 4.5 68,981 6.5 Tier 1 leverage (core) capital (to adjusted tangible assets) 165,050 12.7 51,812 4.0 64,765 5.0 As ofDecember 31, 2021 Total risk-based capital (to risk weighted assets)$ 169,589 17.3 %$ 78,590 8.0 %$ 98,238 10.0 % Tier 1 risk-based capital (to risk weighted assets) 157,481 16.0 58,943 6.0 78,590 8.0 Common equity tier 1 capital (to risk weighted assets) 157,481 16.0 44,207 4.5 63,855 6.5 Tier 1 leverage (core) capital (to adjusted tangible assets) 157,481 12.5 50,284 4.0 62,855 5.0 Pursuant to the capital regulations of theFDIC and the other federal banking agencies, First Bank Richmond must maintain a capital conservation buffer consisting of additional common equity tier 1 ("CET1") capital greater than 2.5% of risk-weighted assets above the required minimum levels of risk-based CET1 capital, tier 1 capital and total capital in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. AtJune 30, 2022 , the Bank's CET1 capital exceeded the required capital conservation buffer. For a bank holding company with less than$3.0 billion in assets, the capital guidelines apply on a bank only basis and theFederal Reserve Board expects the holding company's subsidiary banks to be well capitalized under the prompt corrective action regulations. IfRichmond Mutual Bancorporation were subject to regulatory guidelines for bank holding companies with$3.0 billion or more in assets, atJune 30, 2022 , it would have exceeded all regulatory capital requirements.
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